Following the exit poll results on June 3, foreign portfolio investors (FPIs) made a substantial investment of Rs 6,850 crore. However, in the subsequent four days, amid fluctuating stock prices in market due to the unexpected election outcome, FPIs became significant sellers. Exchange data indicates that in June so far, FPIs have withdrawn Rs 18,109 crore from the cash market, excluding IPO investments. Conversely, domestic institutional investors (DIIs) have made net purchases of Rs 6,864 crore in equities during the same period.
Notably, on June 4, the day the Lok Sabha election results were announced and the Sensex plummeted by 6 percent, net FPI outflows hit a record high of Rs 12,436 crore. Although the Sensex rebounded by 3.2 percent on June 5, FPIs continued to sell, with outflows of Rs 5,656 crore. This trend persisted on June 6, with additional outflows of Rs 6,867 crore.
Analysts attribute the recent FPI withdrawals to India’s high valuations, election-related uncertainties, and a preference for investments in China. However, with the election results finalized and a new government formed under the National Democratic Alliance (NDA), analysts anticipate a potential resurgence of FPI investments in India.
Deepak Jasani, Head of Retail Research at HDFC Securities Ltd, suggests that events such as the passage of a vote of confidence, the announcement of the council of ministers and their portfolio allocations, and upcoming policy announcements, including the Union Budget, could bolster foreign investor confidence. Improved valuations of Indian equities, particularly if Nifty earnings per share (EPS) are upgraded due to revived economic momentum post-government formation, could also attract FPIs. Additionally, indications of rate cuts by the US Federal Reserve or the Reserve Bank of India (RBI), along with favorable monsoon conditions, might prompt FPIs to revise corporate earnings estimates and reinvest in Indian equities.
Market value
On Thursday, the Sensex rose by 692.27 points, or 0.93 percent, closing at 75,074.51. The broader Nifty also gained 201.05 points, or 0.89 percent, ending at 22,821.4.
